Former Lavasa, Steiner India employees fret over unpaid dues

As Lavasa Corp, a subsidiary of infrastructure major Hindustan Construction Company (HCC) that promised to develop a private hill city near Pune, stares at an inevitable insolvency process, around 240 former employees (including from another subsidiary Steiner India Lavasa Business Unit) are at the receiving end.

Three years after they had to quit, voluntarily or involuntarily, the former employees are yet to get full and final settlements despite several assurances by the HCC management of clearing unpaid dues since 2015.

Apparently, the unpaid dues to ex-employees and vendors (amount unknown) are over and above the Rs 3,500 crore debt that Lavasa Corp owes to the lenders' consortium.

"It's been over three years now and company has neither cleared our dues nor are they giving any clarity about when they will make the full and final settlement. We have collectively sent them letter and emails, but in vain. They are least bothered and haven't replied," a former employee of Steiner India told DNA Money.

When contacted, an HCC spokesperson said in an email response that during the restructuring process, through a process of voluntary attrition, around 35 employees exited from Lavasa since 2015, while in Steiner India Lavasa Business Unit, around 128 employees had resigned in the same period. "Regarding full and final settlements of ex-employees in Lavasa and Steiner India, there is no dispute at all on the dues," the spokesperson said.

However, former employees have a very different view. They said HCC/ Lavasa management has not cleared gratuity, unpaid salaries, leave encashment, leave travel allowance etc. despite continuous reminders. According to them, the management has been perpetually ignoring their requests citing company policy.

While HCC claims, in its email response, that the ex-employee dues for Lavasa and Steiner India Lavasa Business Unit are around Rs 7 crore, the figure, former employees said, is much higher. Interestingly, according to Note 17 on financial liabilities in HCC's annual report for 2017-18, dues to employees as on March 31, 2018, stood at Rs 119.33 crore. The figure under the same head, as on March 31, 2017 was Rs 94.33 crore – that's an increase of 26.50% on-year in financial year 2018.

Explaining the note on financial liabilities, the spokesperson said, "HCC follows the accounting on accruals basis which means that a lot of employee dues like gratuity, PLP, leave encashment, etc have to be provided for which is not due for payment and forms a major part of employee dues. Also, HCC has been passing through a phase of financial constraints, primarily on account of non-receipt of its bona fide claims due from the clients. The employee dues indicated in the HCC Annual Report 2017-18 are on account of accrued benefits and other outstanding employee dues on a consolidated basis."

On whether HCC/ Lavasa has disclosed the unpaid dues to ex-employees and vendors, the spokesperson said, these outstandings will be communicated to the insolvency resolution professional (IRP) as per the defined process under NCLT.

Former employees have been constantly following up with the company, but their wait for unpaid dues has only got longer. And now there is complete uncertainty on the possibilities of their dues getting cleared.

That's because, just last week, a corporate insolvency resolution process (CIRP) against Lavasa Corp was initiated by operational creditors under the Insolvency and Bankruptcy Code (IBC). Accordingly, Lavasa Corp has been admitted to the National Company Law Tribunal (NCLT) post which the appointed resolution professional (RP) and the committee of creditors (CoC) are to take charge of Lavasa management and work towards implementation of a resolution plan within 270 days.

"Sensing delays, we began seeking a status from the human resources (HR) department on our unpaid dues. The HR would say that it's in process and that it will take time due to non-availability of funds and related issues," said a former employee.

According to ex-employees the lay-offs happened in a batch of over 100 in two phases from Steiner India Ltd, a sister concern of HCC, that was executing developments in the Lavasa hill city project.

Given the uncertainity around unpaid dues, the former employees and vendors are left with no option but to file a petition with the IRP and put forth their case for recovery. Once the dues are acknowledged by the company, the IRP will admit their claim else ex-employees and vendors will have to approach the NCLT to get their claim admitted. What's further disturbing is that the uncertainity around unpaid dues is likely to continue despite employees taking a legal recourse.

"Former employees will require a very strong legal representation in NCLT akin to what creditors would have, to be able to stake claim on unpaid dues. At times, it becomes an unviable option given the high legal costs and long time frame in such resolution processes. Besides, even after taking these measures, there is no certainty on full payout of unpaid employee dues as the payments (and the ratios thereon) will be decided/ prioritised by the resolution professional (RP). There is also a possibility that the RP may favour the lender group thus helping them get the giant's share from the entire resolution process," said an employee from one of the companies (not from HCC group) admitted to NCLT.

It is very unfortunate that employees (former and in some cases current) are being made to go through a tedious process to claim their hard-earned money. While lower-rung employees are unpaid/ ignored on the pretext of non-availability of funds, company promoters do not hesitate to stake a claim to their own compensation and host of perks while the organisation faces financial stress.

For instance, according to the HCC Annual Report 2017-18, the company has sought approval from the Ministry of Corporate Affairs asking payout of Rs 10.66 crore (as against Rs 1.92 crore and Rs 1.21 crore for fiscals 2014 and 2015) for its chairman Ajit Gulabchand. Additionally, an aggregate of Rs 18.19 crore is being held in trust by the chairman and managing director (CMD).

While on one side there is a financial stress on the company and its subsidiaries, the leadership has blocked a significant sum for personal gains. Ideally, a portion of the money being set aside could have been used to pay-off employee dues that's been pending since past so many years.

Elucidating their stance on higher payouts, the HCC spokesperson said that all payments to the CMD are made on the basis of approvals accorded by company's shareholders. "The money held in the trust by CMD can be regularised after receipt of approvals from the ministry of corporate affairs, which has already been sought," said the spokesperson.

JITTERY TIMES

• While HCC claims dues are around Rs 7 crore, the former employees claim it is much higher
   
• About 240 people who had quit haven’t received their full and final settlements